The Importance of a Deposit in Your Home Purchase
The deposit is a crucial part of your home purchase, typically ranging from 5% to 20% of the property value. Understanding your deposit options and strategies can significantly impact your home buying journey. Here’s what you need to know:
Standard Deposit
A standard deposit of 20% of the property value helps you avoid Lenders Mortgage Insurance (LMI). LMI is an additional cost that lenders charge when your deposit is less than 20% of the property’s value. By saving up for a 20% deposit, you can reduce your overall loan costs and increase your borrowing power.
Low Deposit Loans
Some lenders accept deposits as low as 5%, but you may need to pay LMI. Low deposit loans can make home ownership more accessible, especially for first-time buyers. However, it’s essential to factor in the additional cost of LMI and ensure you have a clear repayment plan.
2.2% Fee – 100% Lending
Suitable for high-income borrowers in major capital cities, this option allows you to borrow 100% of the property value with a 2.2% fee. This can be an attractive option for those with substantial income who prefer to keep their savings invested elsewhere.
Shared Equity Loans
Shared equity loans, which are coming soon, allow you to borrow 100% of the property value. These loans typically involve a partnership between the borrower and the lender or a third party, where both parties share the property’s equity (80/20). This option can make home ownership more accessible without requiring a large upfront deposit.
SMSF Deposit
Using your Self-Managed Super Fund (SMSF) to cover your deposit is another viable option. The SMSF needs to cover the 20% deposit plus stamp duty (if applicable). Conditions apply, and it’s crucial to ensure compliance with superannuation regulations. This strategy can be beneficial for those looking to leverage their superannuation for property investment.
Saving Tips
Building a deposit requires consistent saving habits and reducing expenses. Here are some tips:
- Set a Budget: Create a detailed budget to track your income and expenses, identifying areas where you can cut back.
- Reduce Unnecessary Spending: Focus on essential expenses and limit discretionary spending.
- Explore Government Grants: Look into government grants and incentives available for first-time home buyers, which can help boost your savings.
- Automate Savings: Set up automatic transfers to your savings account to ensure consistent contributions towards your deposit.
Buy Invest Live Mortgage Brokers
Buy Invest Live mortgage brokers can guide you on the best strategies to save for your deposit and explore low deposit loan options. Our team of experts will provide personalized advice tailored to your financial situation, helping you navigate the complexities of home buying and achieve your property goals.
By understanding the various deposit options and implementing effective saving strategies, you can make your home buying journey smoother and more manageable. Contact us today for expert guidance and support in securing the best loan options for your needs.
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